What buyers look for when buying a business

Buyers always want to know how long the business has been in operation.

A business with a long track record means there are good reasons for that business to be operating. It will be well known in the area, and with a strong patronage. The longer it has been in operation, generally, the better the business. It has proven its worth in the market.

How long the present owner has owned the business.

The longer the present owner has owned the business, the more likely he or she has been successful. People don’t stay in business if they are not making money.

Buyers always want to know why you are selling your business.

Buyers are looking for a valid reason for you to be selling your business. Retirement, health, divorce, serious life changing events, and legitimate career changes are good reason. Short-term ownership, lack of profitability, or other business problems are warning signs to serious buyers.

Why books and records are important

Clear and concise financial records are important. How well the company is managed to a budget and how consistently the budget is followed is very important. There should be two financial programs in place for every business, the internal financial statements that are used to operate the business and the annual tax returns. All items in the financial statements should be explainable and if income re-casting is required, it should be measurable within the statements. If the buyer detects any misinformation, credibility can be lost and the sale with it. Don’t hide anything from the financial disclosure because it will only create problems.

What are the assets being sold with the business?

Are you selling the website, name, client base, etc? All items of the sale need to be listed and described. Buyers like to know what inventory, tools, and other items are coming with the sale of the business.

Are you willing to finance some portion of the business sale?

An SBA loan can require the seller to finance as much as 10%. This reassures the lender that the seller has confidence the loan will be paid. When this option is on the table, both buyers and lenders feel more comfortable about the transaction. Lastly, when a buyer sees a seller requesting “all cash” it can create doubts or suspicions in some circumstances.